The Federal Child Support Guidelines: Step-by-Step
Step 5: Calculate annual income
This step provides information about how you calculate income for child support purposes. You can use Worksheet 1, to help you do the various calculations.
Even if you only need to calculate the paying parent’s income in your situation, you both have an obligation to support your children. The receiving parent is also expected to help support the children financially based on their capacity to pay.
Calculating the income on which to base child support can be complicated, especially if you are self-employed or your income fluctuates a lot. It may be a good idea to get help from a third party such as an accountant or a lawyer.
Whose income is needed?
In some situations, only the income of the paying parent will be required. In other cases, both parents’ incomes will be needed.
You will need to calculate both of your incomes if:
- you split or share custody of the children; or
- one of you is the parent and the other acted in the place of a parent to the child; or
- there are special or extraordinary expenses; or
- either of you has claimed undue hardship; or
- your child is at or over the age of majority and the way you decided to calculate child support is different from the way you would calculate it if the child were under the age of majority.
If the paying parent earns more than $150,000 per year, you may need to calculate both incomes. The Federal Guidelines provide two options:
- You can use the tables to determine the child support amount for the first $150,000. Then add the percentage listed in the tables for the portion of income over $150,000. If you choose this option, you would only need to calculate the paying parent’s income.
- You can use the tables to determine the child support amount for the first $150,000. You can then determine an amount for the portion of income over $150,000 by looking at the condition, means, needs and other circumstances of the child and the financial ability of each of you to contribute. If you choose this option, you would need to calculate both incomes.
In some cases:
- You may need to calculate your child’s income—for example, if the child is over the age of majority and you are taking his or her financial means into consideration to determine a child support amount.
- You may need to calculate the income of every member of both households to compare the standards of living if either of you is claiming undue hardship.
Information needed to prove income
If your income is needed to calculate a child support amount, it is important to provide complete and up-to-date income information, including:
- your income tax returns for each of the three most recent tax years; and
- the notices of assessment and reassessment from the Canada Revenue Agency for each of the three most recent tax years.
Depending on your situation, you may also need to share other income information such as:
- your most recent statement of earnings or pay slip, or a letter from your employer stating your salary or wages;
- your corporation’s financial statements if you are self-employed or if you control a corporation;
- information on income you received from employment insurance;
- information on income you received from workers’ compensation;
- information on income you received from disability payments;
- information on income you received from social or public assistance;
- details of any business partnerships;
- copies of any applicable trust settlement agreements, along with the trust’s three most recent financial statements;
- information about your corporation’s pre-tax income if you are a shareholder, officer or controller of a corporation.
In all cases, you must give the other parent copies of any documents you give to the court. If you live in Canada or the United States, you must provide the documents within 30 days of the application being served. If you live outside of Canada or the United States, you must provide the documents within 60 days of the application being served.
If you don’t provide complete and up-to-date income information and your case goes to court, a judge can:
- order you to provide the information;
- impose a penalty—for example, the judge may order you to pay the legal costs of the other parent, which can be very expensive;
- “impute” the income—in other words, the judge may add an amount to set an income that is more appropriate in your circumstances.
How to calculate income
Under the Federal Guidelines, you can do one of the following:
The way you calculate income for child support purposes may be different from the way you would calculate income for tax purposes.
Agree in writing about your annual income.
If you both agree on an amount and you need to go to court with your case, a judge may use that amount to calculate child support if the amount seems reasonable, based on the documents required and rules found in the Federal Guidelines.
Apply the specific rules set out in the Federal Guidelines.
Under these rules, the total income shown on line 150 of your most recent income tax return or your notice of assessment is a good place to start.
You may need to adjust your income if, for example:
- your income varies a lot from year to year;
- you received a one-time payment, such as a bonus;
- you live in another country where tax rates are very different;
- you pay or receive spousal support;
- you receive the Universal Child Care Benefit.
The Federal Guidelines use gross income* because it is considered a fairer reflection of income. Net income allows many discretionary deductions that can make it difficult to set fair support. Also, the child support amounts found in the federal tables already account for taxes.
*Gross income is a person's income before taxes and deductions.
In some cases, the amount of income shown on line 150 of a tax return or notice of assessment may not be an accurate indication of available income.
In cases that go to court, a judge may need to increase the income amount in order to calculate an appropriate child support amount. This is called "imputing" income. It may happen if, for example:
- you are deliberately underemployed or unemployed (unless the reason is related to the care of a child, health or the pursuit of reasonable education);
- you do not have to pay income tax;
- you do not provide accurate and up-to-date income information;
- you live in a country where income tax rates are a lot lower than Canada’s;
- you get a large portion of your income from dividends, capital gains or other sources with a lower tax rate;
- you are, or will be, receiving income or other benefits from a trust.
Please note that you may also need to provide your income information to a recalculation service, if applicable. Recalculation services are administrative services that can adjust child support based on updated income information.
Continuing obligation to provide income information
If your income was used to determine a child support amount in an order or agreement, you must continue to provide income information if the other parent asks. A request for income information must be made in writing and may be made only once a year.
It is also important that you keep each other informed of any changes to your income. This is to ensure that you are paying the right amount of support—not more, not less—based on accurate income information. This is also to ensure that your children continue to benefit from both incomes, even if the family is no longer together. A court could order you to make retroactive child support payments if, for example, you do not inform the other parent of changes to your income. So even if you are not specifically asked or ordered to provide your updated income information, it is recommended that you do so.
Carl and Jade
When Carl and Jade split up two years ago, they agreed that they would share custody of their two children, Francis and Alice. At that time, Carl’s income was higher than Jade’s, and they agreed in writing that Carl would pay child support to Jade. Their written agreement also required both Carl and Jade to share their income information every year.
Recently, the company Carl works for had to downsize. Luckily, Carl was able to stay with the company, but his salary was reduced.
Carl is afraid that he will no longer be able to pay the child support amount. He raises the issue with Jade. They both agree to change their child support agreement based on Carl’s new income information.
You have now determined whose income is required and you have calculated the necessary incomes.
You may want to copy the results in section 6 of your Child Support Tool. If you used Worksheet 1 to calculate your income (or any other means), it is a good idea to attach it to your Child Support Tool. You may also want to include additional information in section 14 of that tool about your continuing obligation to provide income information.
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